The transport sector is an important component of the economy and a common tool used for development. Economic development can be achieved quickly if there is a more mobility of people, goods and information.
- Direct impacts. The outcome of improved capacity and efficiency where transport provides employment, added value, larger markets as well as time and costs improvements. The overall demand of an economy is increasing.
- Indirect impacts. The outcome of improved accessibility and economies of scale. Indirect value-added and jobs are the result of local purchases by companies directly dependent upon transport activity. Transport activities are responsible for a wide range of indirect value-added and employment effects, through the linkages of transport with other economic sectors (e.g. office supply firms, equipment and parts suppliers, maintenance and repair services, insurance companies, consulting and other business services).
- Induced impacts. The outcome of the economic multiplier effects where the price of commodities, goods or services drops and/or their variety increases. For instance, the steel industry requires cost efficient import of iron ore and coal for the blast furnaces and export activities for finished products such as steel booms and coils. Manufacturers and retail outlets and distribution centers handling imported containerized cargo rely on efficient transport and seaport operations.
No single transport mode has been solely responsible for economic growth. Instead, modes have been linked with the economic functions they support and the geography in which growth was taking place.
Transport investments also tend to have declining marginal returns. While initial infrastructure investments tend to have a high return since they provide an entirely new range of mobility options, the more the system is developed the more likely additional investment would result in lower returns. At some point, the marginal returns can be close to zero or even negative,
Economic changes. As economies develop, their function tends to shift from the primary (resource extraction) and secondary (manufacturing) sectors towards advanced manufacturing, distribution and services. These sectors rely on different transport systems and capabilities. While an economy depending on manufacturing will rely on road, rail and port infrastructures, a service economy is more oriented towards the efficiency of logistics and urban transportation. In all cases transport infrastructure are important, but their relative importance in supporting the economy may shift.
Conclusion: Transport also contributes to economic development through job creation and its derived economic activities. Accordingly, a large number of direct (freighters, managers, shippers) and indirect (insurance, finance, packaging, handling, travel agencies, transit operators) employment are associated with transport. Producers and consumers take economic decisions on products, markets, costs, location, prices which are themselves based on transport services, their availability, costs and capacity.